Dana Peterson on US Economic Data Noise and Market Forecasts for 2026

Economic Data Challenges

• 💡 US economic data is currently presenting significant blind spots, making forecasts for the new year confusing for markets, economists, and central bankers.
• 📊 While third-quarter GDP and consumption were stronger than expected, inventories and trade data have been particularly confusing, with import and consumption figures not aligning with inventory numbers.
• 🔍 More data is needed, including next week's releases on inventories, international trade, business sentiment, and employment, to accurately assess the third and fourth quarters.

Interpreting Market Signals

• 📉 The stock market is not seen as a reliable reflection of the real economy, and most people do not benefit from its performance.
• ⚠️ Consumer sentiment data, including the Conference Board's consumer confidence index, shows a lack of optimism about current conditions and future prospects, with confidence levels not seen this low since the pandemic.
• 🛍️ Retail sales data from the end of the third quarter were weaker, indicating a need for more comprehensive information rather than relying on partial data to estimate government figures.

Inflation and Consumer Spending

• 📈 The impact of tariffs on inflation is yet to be fully realized, as businesses are still awaiting certainty regarding trade policies, which could affect hiring and consumer spending.
• 🛒 Consumers are spending, but the nature of their spending has shifted towards necessities, with a preference for cheaper entertainment options over more expensive ones.
• 📉 A pullback in consumer spending is anticipated in the first quarter of the year, when the larger effects of tariffs on inflation are expected to become apparent.

Wage Growth and Real Income

• 🗣️ While wage growth and compensation have slowed from pandemic-era peaks, they are still growing at a pace above the pre-pandemic period (between the Great Financial Crisis and COVID-19).
• 💰 However, real disposable income growth was minimal at 0.0% annualized in the third quarter, which is a concerning sign for consumers.
• 🧐 For some individuals, wage growth may be outpacing inflation, but the overall picture suggests a slowing trend in wages and potential difficulties for consumers.